982 Comments

How do Order Management/Matching Systems match/allocate orders (and filled prices)?Some interesting concepts, thanks a lot. Regarding your comment on the "reduced position transaction" approach, I still believe you need to define a rule around that in terms of where to allocate the shares to. If you had two buy orders, got filled, and now get a fill on a sell order then you still need to decide where to allocate the shares to, hence my mentioning of FIFO. I like the last suggestion, though I would need to think a little more because most our strategy algorithms have very limited knowledge of fills. But logically it makes sense to have the algo define what constitutes a trade

IB API quotes and speedFrom what you are describing the problem lies with the fact that you use DDE which is an obsolete technology; connections often break or freeze. It should have nothing to do with the quotes you see on the front end vs. API. Solution is to utilize other technologies such as XLQ (I think they use RTD which is based on the Com interface and even that is not the newest technology but a lot more stable than DDE)

Oct18

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What is most reasonable approach to determine side of a multi-leg options order?I told you about the market standard practice and it is what it is. I am not familiar with ISE PIM order types, but I am almost 100% that they do not attach a side to the whole structure because it would make zero sense. My hunch is that your structure enters a crossing-engine order book and anyone seeing your order can chose to be on the other side. I do not know whether counter parties are allowed to only trade part of the structure against you or whether they have to take up everything.

Oct18

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Is there a Bloomberg field for a bonds (upcoming) coupon dates?You can get the next coupon dates as the previous answers and this shows. But I do not understand your comment about not wanting to deal with calendars. Bloomberg has also calendar functions with overrides where you can specify the locality and start and end date and hence get the number calendar and business days between the specified dates. What else do you need?

Oct18

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What is most reasonable approach to determine side of a multi-leg options order?The structure you showed is a custom structure and generally there is no specific market standard structure that matches yours. It is not even evident whether your structure is gonna be delta hedged at the outset. Hence, one cannot say that any custom structure xyz is a buy or sell unless you refer to being long or short any of the greeks. And for that you need to provide more information (such as delta, gamma, or vega of each option) in order to determine whether your structure is net delta, gamma, vega long or short

Oct15

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Volatility ScalingYour question contains contradictions. Once you (correctly) point out that volatility scales with the square root of time, then in your question you do not apply the same.

Oct15

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Volatility Scaling@jessica, no the issue is that you have several thought errors in your questions. First you (correctly) point out that volatility scales with the square root of time, then in your question you scale by time and wonder why the result is not anywhere near the quarterly vol you stated...btw...are none of the 15 (x number answers provided) out of your 20 questions worth marking as correct? Maybe you could work a bit on your accept rate?

Physical Option Implied Distribuition@Ryogi, I appreciate your point, but so is the pursuit of many other subject matters that may, however, never prove futile in actual trading or risk management. My point refers to the fact that some asset price profiles are of such dynamic nature that the derived real-life distribution may be applicable over a short period of time but it may change unpredictably in terms of properties and timing. What is the point to know what the true distribution of the underlying stock price is today if you cannot have confidence that such distribution applies tomorrow or to other stock prices.

Oct13

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Physical Option Implied DistribuitionSorry, let me be a little more precise. We would still need risk neutral probability measures even if we know the exact distributional properties of the underlying asset because we still do not know the real expected return as a result of unknown utility. But what I see as the biggest problem is that the real distributional properties are unstable, they are dynamic and exhibit very little cointegration, so what is the point of wanting to "recover" them?

Oct13

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Physical Option Implied Distribuition@Ryogi, care to comment on what you mean with that? If we could always recover the asset price distributions under the general risk measure then why would we use translation tools such as Black Scholes in the first place? If we know the exact price and return distributional properties and therefore know the payoff probabilities of contingent claims then we do not have to bother with risk neutral probabilities. Obviously that is not the case hence my point that we do not "need" the physical measure (other than of course for educational entertainment)

Oct12

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VaR for FX forwardsfx forwards are linear products and are strongly correlated with spot rates. So, your single biggest exposure is gonna be the currency exposures that you contractually promise to deliver and receive. More in my edit.

Oct10

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Physical Option Implied DistribuitionYou don't need to map them to the physical measure. Please read any of the basic option valuation text books or papers and it should become clearer.